The widening gap between rich and poor distresses most Americans. The distress is not limited to the poor, and middle-class. Some who are doing well feel guilt over a range of societal reminders of the inequality of life in the richest and most powerful nation in the world. Billionaires like Warren Buffett note that his secretary is taxed at a higher rate than himself.
Some Americans despair because the gap seems insurmountable; many despair because few politicians and leaders know what to do about it. Many who have wealth think it is because of their hard work. They discount inheritance and the luck of being born in the right family. As President Trump notes, he received a $1,000,000 loan from his father to get a start in the real estate industry.
Many of the rungs of the ladder to success are broken.
Income beyond the necessities of life, the cost of education, medical coverage for unexpected illnesses, and the nature of American capitalism get in the way of equal opportunity. When both mothers and fathers work and can only provide shelter and food for their family, they find it difficult to provide support and nurture of their children. Instead of nurturing and supporting, parents default to freedom by neglect.
There is a growing perception of primary and secondary schools as babysitting agencies rather than learning foundations. Television and video games become teachers, mentors, and guides for latch-key children.
Education is a necessity in a changing technological world but the cost and quality of education reinforce development of an underclass trapped in poverty. It is not simply a matter of colleges or secondary education facilities. Private industry needs to expand its training for sorely needed employees looking for advancement. Apprenticeships and mentor-ships need to be developed and nurtured in the private sector. Until the private sector takes more of a lead in educating and retraining workers, there will be a labor shortage in America.
Vilifying immigrants is scapegoating a fundamental problem in postindustrial countries. Qualified labor is in short supply because of aging demographics and the failure of businesses and government to cooperate in expanding education and training of the underemployed.
If Americans wish to remain a great economic power, it must encourage legal immigration and education of the employed and unemployed. There are not enough young people in post industrialized nations to carry the burden of an aging population and the need for an expanded safety net for the mentally challenged and physically handicapped.
America’s political leaders argue about the cost of medical insurance and needs for its citizens while being pampered by special interests (doctors, lawyers, and insurance companies) that provide elected officials and government employees a living wage, medical insurance, and a measure of employment security.
Lobbyists for these special interests feed elected officials re-election money to get favorable regulatory legislation to improve doctor, lawyer, and insurance company profitability.
Insurance companies pedal their policies to the government while the needs of the poor are marginalized. Political representatives hide behind belief in a mythical economic invisible hand that will serve those who work the hardest. To some affordable insurance deniers and their elected representatives, it is a matter of survival of the fittest; i.e. the unemployed, the homeless, the mentally disabled and handicapped are considered guilty of their own condition.
There is no invisible hand. Without a private sector insurance system, medical treatment would have to be collectivized. The idea of nationalization is disastrous. There are not enough doctors to serve the needs of citizens now. Collectivization through a single payer system will make doctor shortages worse. Complaints by doctors of insurance company interference is preferable to a doctor shortage with increasingly longer lines for service. A single payer system is not the answer. Regulation of the insurance industry is preferable to any form of collectivization.
Some argue that regulation is a slippery slope to communism. That is a red herring. Self-interest is an undeniable human characteristic of America democracy. Medical insurance, like the banking industry, must have government over site. Just as banks have prospered with regulation, so can insurance companies.
American capitalism favors the wealthy at the expense of the poor. On the one hand, the stock market is a beacon of freedom because it provides private capital for the expansion of the economy. On the other, tax advantages for those with enough money to buy stock, get a free ride off the working poor. The poor do not have the advantage of disposable income to invest. Lower taxes on capital gains make the rich richer and leave the poor further behind.
There will always be haves and have-nots, but America needs to level the playing field. Both American government and private enterprise need to step-up to improve education, open minds to a world economy, and provide a realistic safety net for all citizens.
Black Edge: Inside Information, Dirty Money, and the Quest to Bring Down the Most Wanted Man on Wall Street
Written by: Sheelah Kolhatkar
Narrated by: Kaleo Griffith
In “Black Edge” Sheelah Kolhatkar masterfully recounts the dark side of capitalism. The American stock market is a tremendous source of energy (private money) for entrepreneurial capitalism. At the same time, a poorly regulated stock market pollutes the capitalist ideal.
Capitalism is an economic and political system for trade and industry that allows individuals rather than a collective determine one’s future. The capitalist ideal’s upside is that people have more freedom. The downside is unrestricted human nature becomes brutish and unfair. Some form of governance is needed to provide rule-of-law. Without rule-of-law, society devolves into an anarchy of individual interests. There is no “invisible hand” that guides an economy to equal opportunity; i.e. there is only human nature and its penchant for good and evil.
Kolhatkar explains the meaning of black edge information. She shows how the American stock market becomes a breeding ground for greed. In the stock market, black edge information is personal notice to private investors of events that affect stock prices. The information is proprietary and unknown to the public. The private investor chooses to buy or sell stock before the public knows of an event that will affect stock prices. Steven A. Cohen develops an organization, SAC Capital, that revolves around gathering proprietary information before it is known by the public. Cohen becomes one of the richest men in the world by using that information.
In one sense, this seems a “no harm, no foul” entrepreneurial benefit in capitalist society. Cohen pays big money for traders that can provide him inside information. People are employed and well compensated for their effort.
However, Kolhatkar infers there is harm, and it is foul. It breeds an organizational philosophy of abuse. Cohen creates a “dog eat dog” organization that hires and fires people based on revenue made or lost on investment. Individual traders are compelled to violate the law by soliciting black edge information that is not available to the public. The only criteria for success is money; not family, not friendship, and not society.
One may argue, so what? Cohen becomes a rich man and is known as a benefactor to charities based on his accumulated wealth. Some of the traders that worked for Cohen became multimillionaires. Similar arguments can be made for the Koch brothers. Where is the harm? Where is the foul?
The harm is somewhat inchoate but care for others is missing in Kolhatkar’s story. Lives were ruined by Cohen; i.e. some of his closest associates are abandoned, traders operating as information gophers break the law, and Cohen’s personal life falls apart. He is divorced by his first wife. Cohen focuses on making money because it offers power and prestige. The gap between rich and poor widens because of Cohen’s philosophy of life. In the end, Cohen is found not guilty of insider trading but he leaves a trail of human destruction.
The story of Steven Cohen is the story of a Trump presidency in the United States. America loses its way when capitalism is only seen through the prism of wealth. The “Get out of my way” philosophy of Cohen and Trump are cut from the same cloth. The difference is–one is more financially successful than the other.
Capitalism is not the problem in America. It is the failure of the S.E.C., the FBI, Presidents, and congressional legislators to do their job. The purpose of the American government is to protect the public through rule-of-law. Every day, we see a President denying immigrants the chance of becoming a part of an American Dream that made and makes America great. We see an Education Secretary intent on dismantling our public education system. We see a congressional and departmental effort to dismantle health care and welfare. We see Americans being discriminated against because of their sex, race, and religion.
Human nature is not self-regulating. Unregulated human nature is brutish. The checks and balances of the American government are founded on that truth. When the American government fails to exercise its mandate for the health, education, and welfare of the nation, it diminishes capitalism. It diminishes a way of life cherished by most Americans. People like Steven Cohen and Donald Trump are guilty of being human and un-ruled.
The Courage to Act: A Memoir of a Crisis and Its Aftermath
Written by: Ben S. Bernanke
Narrated by: Grover Gardner
Politics and administration is a marriage of necessity. Ben Bernanke writes a “nuts and bolts version” of the role of the Federal Reserve in the United States during the economic crises of 2007-2008, a crisis that continues to plague the world.
Bernanke is the chairman of the Federal Reserve during the near collapse of the world economy. The story Bernanke tells is consistent with most details revealed by Tim Geithner and Henry Paulson (the former Department of the Treasury Secretaries) during the worst part of the 2007-2008 global financial crises.
What Bernanke adds to Paulson’s and Geithner’s version of events is a more transparent understanding of how American politics and administration dealt with the greatest economic crises since 1929. These three managers, along with elected officials and other public administrators, cussed, discussed, agreed, and disagreed on actions taken to stabilize the American economy.
Without a level of cooperation between politics and public administration, it is entirely possible America would be in the middle of its second great depression.
The mortgage crises of 2007-2008 is a “Black Swan” event in American history. A “Black Swan” is a metaphor for an event that is generally unforeseen that changes the direction of history.
The packaging of real estate and home mortgages of varying levels of security leads to the mistaken belief that housing and commercial land prices will always increase as the economy expands. This false belief led to sales throughout the world of figurative IEDs (Improvised Explosive Devices”) that bankrupted individuals, corporations, and Nation-State economies. The shock waves of these instruments of economic mass destruction continue to impact the world economy.
With the advent of computer technology, combined assets became so complex that individual human judgement of value became clouded. With each individual asset added to a conglomeration of houses, property, and/or stocks, value changed. The change was meant to spread risk and increase financial stability of combined assets. However, as similarity of combined assets accumulated, the created aggregate became more (rather than less) vulnerable to market change.
The rising risk of these combined securities is compounded by “independent” rating agencies. If vulnerabilities are not clearly understood, sellers of these security conglomerations rely on ratings from analysts that underestimate volatility.
This “so-called” independent rating system fails investors because both sellers and buyers are incentivized to buy and sell a security that is not clearly understood. When one of the derivative assets begins to lose value; particularly if the asset is related (like land and vertical construction) all assets in the packaged security are infected by loss of value.
Rating companies lose their objectivity. They may be incentivized by the same companies they are evaluating; and/or are paid for report productivity rather than quality of investigation. Greed seduces both buyer and seller.
Though this explanation of derivatives is too simply described in this review, it is inferred in Bernanke’s, Paulson’s, and Geithner’s books to have been a contributory cause for the loss of trillions of dollars in the world economy.What makes Bernanke’s book interesting is his explanation of how politics and public administration worked together to right America’s sinking economic ship-of-state. Even today, recovery is not complete but the ship did not sink. “Working together” is a qualified description of what happened based on Bernanke’s view. There were bitter disagreements among elected and administrative agents that could only be resolved with an appreciation and exercise of politics.
Politics have become synonymous with lying and misrepresentation in the modern world. Some say President Trump exemplifies that belief.
Not to defend Trump, but his election is a consequence of ignoring the importance of politics in determining what is right and wrong in America’s democracy. Democrats were not listening to middle class America. Politics in a democracy represent the will of people who are being governed. Without politics, the best intentions of administration devolve into ineffective and autocratic actions that fail to serve the needs of its citizens.
On many occasions, Bernanke shows how elected officials remind administrators of the real-world impact of their policy actions. The give and take of politics is a bridge between a government policy idea and citizen impact.
The Affordable Care Act is not perfect because of politics but modifications made are the result of political input from the constituents of American Democracy. Those constituents are companies, professions, and individual citizens represented by elected officials who work with government agencies responsible for administration. It is a messy process, but politics is a bridge between thought and deed that can (when discounted) devolve into autocratic dictatorship; i.e. a dictatorship that inevitably leads to unintended consequences that fail to meet the needs of represented citizens.
The Federal Reserve, the Departments of Treasury, and America’s elected officials successfully saved America from a second Great Depression. Messy politics saves America; i.e., the political interface between President Bush, President Obama, Treasury Secretaries Paulson and Geithner, Federal Reserve Chairman Bernanke, Senators and Representatives of Congress, and the Supreme Court cussed, discussed, agreed, and disagreed to keep America great.
Every economic theory is burdened by a temptation of pundits to pick and choose what they wish to believe. Keynes, von Mises, and Piketty are cases in point. Each has an economic view that resonates with some but appalls others. Robert Reich, though not an economist, is undoubtedly appalled by von Mises, and less so by Keynes and Piketty. This review is no less subject to the temptation of “pick and choose”.
In broad outline, von Mises objects to any interference in free trade. Von Mises decries nationalist tariffs, industry subsidization, planned economies, and political interference with business failures. Keynes endorses government intervention in economic crises. Piketty argues that the widening gap between rich and poor foment revolution. Each economic belief is supported and faulted by chosen historical events.
Von Mises theory may be proven based on the false economies of communism that led to the collapse of the U.S.S.R. Equally, von Mises theory can be attacked with the evidence of America’s subsidization of the oil, transportation, and technology industries that led to huge economic benefits for the United States.
Keynes’ interventionist theory may be proven true by George Bush’s and Barrack Obama’s recovery actions after the 2008 financial crises. On the other hand, government intervention allowed many millionaire and billionaire fat-cats to escape prosecution for being the human cause of the 2008 crises. Though fines were levied, no corporate CEOs were jailed.
Piketty points to the French Revolution as credible historical evidence for consequence of an increased gap between rich and poor. On the other hand, improvements in energy, transportation, finance, and manufacture can be traced to business moguls like Carnegie, Rockefeller, Vanderbilt, and Ford. They may be history’s robber-barons but their drive and determination raised the standard of living for millions of Americans.
A common thread in an American capitalist economy is pragmatism. American capitalism has changed in every generation since 1776. Today, America is enduring the biggest economic and social change since the industrial revolution. It is change wrought by technology.
Like yesterday’s invention of the cotton gin, the steam engine, and farm machinery, jobs were lost. Today, it is robotics, and artificial intelligence that are changing the economy and the availability of jobs. Jobs disappear with each new labor-saving invention.
The consequence of unemployment is frightening and unsettling. However, the shape of the American economy will adapt just as it did with the industrial revolution.
There are modern Luddites fighting that change but as pragmatism takes hold, jobs will be created to fill the gap. Reich implies job loss can be overcome with government intervention. He suggests job creation can come from personal services like health care, elder care, child care; etc. Reich calls for government support of education to retrain labor, increase productivity through technology, and regulate private industry to correlate pay with accountable economic contribution.
Reich tentatively suggests government provide a minimum wage for all citizens based on a subsistence level of income. He argues that incentive to work will not diminish human motivation. He suggests Americans will continue to be motivated to do better than just get by in life. To many Americans, the idea of an unearned wage would be a fundamental mistake.
On the other hand, what if minimum wages are raised to a subsistence level. Not unlike the principle of Habitat for Humanity where family participation in building of a pre-qualified buyer’s house is required. A pre-qualified family (one that has employment and no bankruptcies) receives a below market price and mortgage on the house being built. However, the family must participate in the construction of the house. The mortgage payments are tailored to the income of the family. If they miss payments, they lose their house. On the same Habitat principle, a minimum wage worker who fails to do a good job, loses it; with no safety net (except in cases of mental or physical disability).
No one is likely to totally agree with any solution for the widening gap between rich and poor in the world but American capitalism has shown a willingness to pragmatically attack whatever creates conflict in the world. Sometimes the proposed solution is wrong. Some solutions do not work but America adjusts to eventually fit the circumstance. It is not a process without pain, but capitalist pragmatism is the most successful governmental system of modern times.
The biggest criticism one may have of Reich’s book is that he spends too much time explaining what is wrong with American capitalism. Yes, it is unconscionable that some CEOs are making 300 times what their employees make.
Yes, stock value is often unrelated to a CEO’s exemplary performance. Stock prices often increase because of stock price manipulation or other factors beyond the control of its executive officers.
Yes, labor is denied a seat at the table when corporate decisions are made. Yes, unions are disadvantaged by corporations that can be treated as individuals when unions are systematically sidelined and/or ignored.
Yes, corporate board members (often former members of Congress) are being paid hundreds of thousands of dollars for 4 meetings a year. How can they not be prejudiced to support corporate executives they are supposed to be overseeing?
Reich’s book would have been more interesting if he had spent more time on pragmatic solutions. The gap between rich and poor does foment revolution. One supposes Reich describes the problem in such detail because he presumes few understand what is happening in America. “Occupy Wall Street”, the national press, and the internet would beg to differ.
American capitalist pragmatism remains the best hope for equality of opportunity and qualified human freedom.
Ludwig von Mises is a twentieth century Machiavelli. This audio-book details a theory of economics that will offend modern liberals, expose weakness of libertarians, and vilify the new American President’s nationalist policies. The venality of treating government as a business is a mistake of monumental proportion.
Approaching von Mises as a devil incarnate is unfair. His beliefs are pilloried by today’s liberals as loudly as aristocrats and rulers vilified Machiavelli in the 16th century. Like Machiavelli, von Mises looks at the world as it is; not as it ought to be. His observations cut at modern liberal, as well as anarchic views of highly regarded liberals like Ralph Nader, Martin Luther King, Norm Chomsky, and alleged conservatives-like President Trump. In von Mises book, Roosevelt’s New Deal is a socialist mistake. Additionally, von Mises vociferously disagrees with John Maynard Keyne’s economic interventionist creed. Ironically, Donald Trump may be the most interventionist President since FDR with scatter brained economic plans that von Mises would equally vilify.
Von Mises observations have credibility based on facts drawn from history. What they do not have is social conscience. Von Mises suggests social conscience is a fiction perpetrated by socialists and populists to distort the value of capitalist economies. Like Machiavelli, von Mises observes the nature of human beings, and recognizes their inherent irrationality and moral weakness.
Von Mises illustrates numerous examples of human irrationality; beginning with market consumption, and ending with entrepreneurial ambition. Donald Trump exemplifies von Mises’ argument that humans are irrational, greedy, power-hungry, and vain.
For President Trump to believe taxing imports by 20% makes Mexico pay for a useless five-billion-dollar wall is absurd. The American consumer will pay for that wall in increased cost of Mexican produce and manufactured goods.
Von Mises criticizes famous economists like David Ricardo for introducing politics into economics. Von Mises argues that the drive for money, power, and prestige are inherent in an entrepreneurial capitalist system. With the introduction of politics into economics, the power of consumer’s free choice is diminished.
Von Mises argues that government officials who profess social conscience distort free enterprise by picking winners and losers. When politicians pass legislation that aids one entrepreneur over another, it distorts the driving force of capitalist economies. Even if capitalism appeals to baser instincts of humankind, if capitalism is left free, von Mises believes consumer choice will ameliorate capitalist greed, abuse, and vanity.
Von Mises vilifies government leaders who impose tariffs on international trade. He explains that the fallacy of government leaders who pass favoring legislation is that the real mover of the economy is the consumer; not the producer. If the consumer chooses not to buy an entrepreneur’s product or service, he/she fails.
The logical extension of von Mises’ theory is that any government plan or action that affects an entrepreneur’s willingness to take a risk is bad for society. The practical consequence of his theory is that charlatans will game the capitalist system but in the long run society will benefit from the creativity of entrepreneur-ism. His theory expects bad actors like Bernie Madoff will prosper but that bad aspects of entrepreneurial self-interests are offset by general economic progress.
To von Mises, efforts to organize labor is an interference with capitalist entrepreneurs because labor is not taking a risk. Von Mises argues that labor value will find its own level by being an automated tool of the entrepreneur; subject to hunger and deprivation if they choose not to participate.
Von Mises point is that the entrepreneur will pay what he/she must to have labor available, but no more than what the end-product’ consumer is willing to pay. (This judgement presumes the entrepreneur is neither inordinately dishonest, power-hungry, or vain.) What the entrepreneur is willing to do is take a risk on the consumer’s willingness to buy. If the consumer buys, the entrepreneur is successful; if not he loses his business.
Von Mises believes labor has a choice. They can work for low wages or remain idle. The fallacy of that argument is the inherent unfairness of not having enough income to live. Von Mises suggests the laborer can wait. Waiting implies his/her family may starve, become homeless, or choose to commit crime to survive. History illustrates how inequality creates revolutionary discontent.
Unions offer a vehicle for leveling the power between businesses and labor. To not allow unionization is tantamount to favoring businesses that are no longer competitive but, today, are legally recognized as the economic equivalent of individuals. Not to give unions a place “at the table” is morally, ethically, and economically unfair; particularly in industries that are no longer entrepreneurial. Many businesses have become large bureaucracies; not unlike wasteful government agencies that are self-perpetuating but unnecessary and/or unprofitable.
Another von Mises’ observational factoid is that government policy should have no role in subsidizing new inventions, new drugs, the ecology of the world, or the elimination of slavery because such policies interfere with pure capitalism. This reinforces absurdist arguments of libertarians.
American creativity has historically been benefited by government subsidization of technological advances. (President Putin noted in a 60 Minutes’ interview that creativity is his most admired quality in the American community.) The speed of improvements in health, education, and welfare historically increased with government subsidization of drug research, public education, and the energy industry.
The fallacy of von Mises’ theory lies in the framework of theorists. It ignores human existence by hiding behind the un-quantifiable nature of society. One may argue that America’s Civil War had nothing to do with the elimination of slavery. (Von Mises suggests that slavery was abolished because it became too expensive; not because it was morally and ethically reprehensible.) One may argue that Roosevelt’s New Deal was a failure. One may argue that the Marshall Plan after WWII rewarded failed nations. One may argue that George Bush’s and Barrack Obama’s decisions to bail out the American economy interfered with pure capitalism. History suggests von Mises is both right and wrong. Government intervention can be good as well as bad.
Von Mises lived into the 1970 s. How could he ignore the moral and ethical iniquity of slavery, the value of the Marshall Plan, government subsidization of the American banking system, financial incentives for the energy industry, and the billions spent to advance technological inventions? There are good examples of government intervention. On the other hand, building a wall between Mexico and the U.S. and levying a 20% import tax is a bad government intervention.
American capitalism works because of the checks and balances written in the Constitution. Von Mises theory is based on valid observations but social conscience, whether statistically measurable or not, must be a part of decisions that affect the lives of millions. Mistakes will be made, and have been made, but economic statistics cannot be substituted for pragmatism.
Nassim Taleb blows the whistle on precise knowledge. Taleb suggests precise knowledge is a fiction whether recorded as history or projected as future. Taleb argues history is distorted by the historian and the future is unknowable. Taleb is disdainful of experts, beginning with oxymoronic titles like “social scientist”
and ending with Nobel Prize winning economists. Taleb is a skeptic in the sense of a Montaigne, but with one monumental difference. Taleb is flaunting while Montaigne is self-effacing.
Several years ago, an associate of mine said he worked to become rich. In his mind, being rich meant no one could tell him what to do. Taleb reminds me of that person. “The Black Swan” is the title of Teleb’s book. The title is a metaphor for events that are unforeseen and unknowable; e.g. events that are so consequential they change the future. In Taleb’s view the stock market crash in 1987 (black Friday) is such an event.
Taleb’s thoughts slap expert’s faces.
His theory of unpredictability makes fools of economists, political pundits, news purveyors, stock brokers, social scientists, and many (if not most) philosophers and mathematicians. (Two exceptions are Karl Popper and Benoit Mandelbrot. ) The credibility of Taleb’s argument is reinforced by the serendipity of life and expert’s underestimation of new discoveries’ consequence.
One of Taleb’s insightful observations is that human consciousness of life is linear while nature creates life serendipitously. The human mind demands story continuity while nature simply follows the physics of life. Nature is an opportunist while humans tend to believe there is a reason for every consequence. Taleb makes that opinion concrete with examples like the 1987 stock market crash.
No one perceived the potential of a market collapse because of faulty computer algorithms that influenced stock market trading. No one, including Taleb, forecast computer trading fallibility. However, Taleb’s theory of “The Black Swan” compelled him to create a fail-safe for an unexpected market collapse. He hedged his portfolio to become a rich man.
Taleb suggests, at best, we live in a world of probability without any definitive assurance of cause and effect. That suggested truth discounts every news report, and every prognostication made by human beings. Taleb says he does not listen to the news because facts are distorted by the consciousness of human beings. Luck and fate are a reflection of Taleb’s cynical view of experts. It reminds one of today’s American President.
Taleb implies that reverse engineering the brain to enhance A.I. is a blind alley. On the bright side, the inference is that computers will never replace human abilities. The dark side is that computer potential will always be limited by human abilities.
Much of what Taleb argues is reinforced by the science of experimentation. Physics suggests we live in a probabilistic world. No outcome is perfectly determinable. Life has grown into complexity from simple beginnings replicated with minuscule changes that occur over time. The human brain thinks of life in geometric forms (straight lines, triangles, squares, etc.) while life is as jagged as a mountain. Life is interconnected with a butterfly’s flapping wings and “spooky action at a distance”. It grew from simple cells to chains of DNA. In life’s complexity, there is no certainty; there is only probability.
Despite Taleb’s belief in life’s improbabilities, he considers himself an optimist. His point seems to be that there is no such thing as precise knowledge but with knowledge of the existence of “…Black Swans”, human beings can expect the unexpected. In that expectation, it is possible to live life joyfully, if not perfectly. One wonders if President Trump is a black swan or something more sinister.
Data and Goliath: The Hidden Battles to Capture Your Data and Control Your World
Written by: Bruce Schneier
Narrated by: Dan John Miller
Bruce Schneier’s book is about battles with government and private industry for personal privacy and freedom in the information age. The seriousness of the subject is diminished by millions of us who revel in the knowledge, accessibility, and convenience of the internet. However, Schneier explains how our appreciation and use of the internet threatens privacy and freedom.
Perfect as an adjective for human is an oxymoron. All human beings are emotionally and intellectually imperfect. Human beings conduct their lives within normative social boundaries. They are generally not criminal, sexually perverted, or psychologically impaired. However, all human beings transgress some social boundaries. Most individuals feel appropriately guilty for their transgression; suffer the personal and societal consequence, and then get on with their lives. This loose definition of humanity seems a fair description of all human beings. However, Schneier argues that use of the internet categorizes, spindles, and mutilates human lives. Like a forest being attacked by borer beetles, the internet infects the public; not with malicious intent, but with a hunger for money, power, and prestige.
The borer beetles of the internet are well-known; e.g. Apple, Microsoft, Facebook, Google, Amazon, the Federal Government, and a host of smaller species. Some borer beetles can kill a forest, while others benefit nature’s ecology by getting rid of weakened trees to regenerate healthy trees. Schneier suggests America is at a crossroad where captured data from the general public will either grow into a society’ killer or a humanized friend.
Schneier suggests or implies government, eleemosynary, and private entities continually gather personal information and mine it for public and private purposes. The government’s objective is to protect American citizens from crime and terrorism. Churches and charities’ objective (though not specifically addressed by Schneier) is to evangelize and increase donations for “good works”. Private industry’s objective is to increase profitability.
On some level, Schneier suggests there is no harm; no foul. On another level he argues, surveillance, big data collection, and unregulated invasion of privacy attacks the foundation of democracy. Though the right to privacy is not explicitly protected by America’s founding documents, Schneier suggests the internet encroaches on the 4th 5th and 9th articles of the Constitution.
Schneier acknowledges the benefits of the internet; e.g. educational opportunity, communication timeliness, shopping convenience, banking access, and interconnection. Every article written in this blog is benefited by information available on the internet.
Convenient purchase of consumer goods requires no trips to a local vendor. The bank writes checks with a few taps at a computer terminal. A personal Ipad, Iphone, and laptop communicate with each other via Bluetooth with input required only once; on one device. A wonderful life with no harm, no foul—right? Schneier notes there is a price paid for these benefits. Unquestionably, the internet is a great source of valuable information and convenience. However, it is also a vehicle for illicit activity. The internet reveals personal information about users that embarrass, bully, and sometimes ruin lives. It disseminates bigotry that recruits like-minded miscreants. It provides access to bank accounts, credit cards, and other financial instruments for fraudulent use.
Every purchase made on the internet becomes a factoid in the history of a purchaser. All of these factoids are accumulated and used by privately owned search-engine companies (like Google, AOL, and Amazon) to profile personal habits and preferences. That information is sold to retailers for a fee. Private retailers use that information to customize their sales pitches to consumers. The retailer adjusts prices according to the buyer’s purchasing and income profile.
To increase income, the search engine owner sells the retailer a first position on internet searches. That first position increases probability that the profiled consumer will purchase from that retailer who has enough information to estimate how much you are willing to pay. The public is being manipulated by retailers that know where you are, what you buy, and what you are willing to pay, or are capable of paying. Retailers who purchase data from search engine owners can estimate (if not know) your net worth, sexual orientation, educational achievement, and personal preferences.
The internet is a money machine for search-engine owners. First, the search-engine owner raises revenue by selling personal information and then increases income by selling positions on search-engine web pages. The retailer benefits by having personal consumer information and a primary position on web-page searches. It increases the retailer’s odds of being seen on a search and the consumer’s likelihood of purchase. Schneier implies the consumer is being controlled by Goliath’s data collection. Goliath is a two-headed dog guarding the entrance to Sartre’s “No Exit” hell. The David in this battle is the consumer with only hope and a sling shot to defend himself. The sling shot has no ammunition and no target because no remuneration goes to the consumer and the information has been stolen anonymously.
The internet is a supersonic communications vehicle. There is no waiting for the mail. Instant messaging and the twitterverse are part of the spindling and mutilating process of the age. Thinking before one speaks is yesterday’s reality. Today, even in the race for President of the United States, speaking-without-thought is commonplace.
The internet is a worldwide recruiting vehicle for the extremes of society; some of which fly airplanes into skyscrapers in New York, bomb government buildings in Oklahoma, and murder innocents in Manchester. Internet access provides a forum to convince people of the iniquity (either false or true) of an enemy or government.
With the click of a mouse, and a newscaster’s ego fiction competes with truth to lead and mislead the public. Publicly shared television news programs created by professionals are now created by anyone with access to the internet. There is no incentive or structure to fact-check reports posted on the internet.
Schneier suggests government intrusion into private lives has gone too far as a result of 9/11 and other terrorist events around the world. Schneier implies that Edward Snowden is a hero; not a traitor. Snowden exposed the covert surveillance of the NSA (National Security Agency) in gathering information about private citizens without their knowledge; and without probable cause, or judicial consent. Schneier argues that big data surveillance, by private enterprise and the government, have colluded to compromise freedom and control the individual.
Schneier suggests that promulgation of fear, exacerbated by public access to the internet, causes the government to overreact. He notes how the Prime Minister of Great Britain, David Cameron, stated that he did not want to be accused of not protecting British citizens because of lax surveillance of private citizens. This climate of fear pervades the politics of our time. It is not the first time America abandoned the principles of privacy and freedom. Schneier notes the “Alien and Sedition Act” passed by Congress and signed by President John Adams, the incarceration of American Japanese during President Roosevelt’s administration, and the McCarthy witch-hunt for communists in the 1950 s. He suggests those were mistakes made then; with the same mistakes being made now.
Schneier offers solutions. He acknowledges the necessity of surveillance but believes public oversight should be strengthened. Government regulation should require judicial warrants for spying on an individual. He argues that mass data collection is an unwarranted invasion of privacy that has little value in defeating terrorism. Only after the fact did mass surveillance reveal the perpetrators of the Boston marathon bombing. He suggests the same is true for the shoe bomber and the terrorist attack of the disability hospital in California. Mass data collection does not protect the public.
Schneier suggests consumers should know who, in the private sector, is accumulating their personal information. Private citizens should have a right to opt out of private sector data collection by any internet user. He believes a set of rules should be established for government to follow when seeking individual surveillance. Schneier suggests those rules should be designed for transparency; legislatively adopted, and justified by legislators to their constituency.
Schneier infers there is tremendous value to be drawn from the internet. There is the value of education, and quick reference to the news and history of the day. There is the informational value of a world of different cultures that have common needs and aspirations. There is the potential benefit of mass data collection on medical history of individuals and their treatments for fatal injuries or illnesses. Medical successes will be more quickly codified for improved patient treatment of common maladies. There would also be the added benefit for a patient changing physicians with a comprehensive history available for review.
Schneier cautions that an individual’s data should be encrypted in ways that limit access to only those authorized by the individual. In general, Schneier is a proponent of encryption to secure the privacy of individuals.
Schneier’s book aptly describes the threats and benefits of big data. Terrorism is real but its threat cannot become an excuse for denying the privacy and freedom of the individual. Terrorism is just one of many risks in life.